Search Government Affairs

Second Opinion

Washington Highlights

Treasury Issues Warning on Debt Limit

October 4, 2013—The U.S. Department of Treasury Oct. 3 released a report detailing the macroeconomic effects of the current brinksmanship over raising the federal debt limit. The report states that a default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, and U.S. interest rates could skyrocket, potentially resulting in a financial crisis and recession that could echo the events of 2008 or worse.

Treasury Secretary Jacob Lew warned, “Postponing a debt ceiling increase to the very last minute is exactly what our economy does not need – a self-inflicted wound harming families and businesses.

The report notes that even the possibility of a default could roil financial markets and damage the economy, thereby harming American businesses and households. It also states that if the current government shutdown is protracted, it could make the U.S. economy even more susceptible to the adverse effects from a debt ceiling impasse than it was prior to the shutdown.

The debt ceiling was reached in May. Since that time, the Treasury has used what are called “extraordinary measures” to avoid defaulting on the nation’s obligations. Secretary Lew notified Congress in August that these extraordinary measures would be exhausted by the middle of October.